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Public company info - Tianhe Chemicals Group Limited , 01619.HK
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Tianhe Chemicals Group Limited, 01619.HK - Company Profile
Chairman WEI Qi
Share Issued (share) 24,802,000,000
Par Currency U.S. Dollar
Par Value 1.0E-6
Industry Chemical Products
Corporate Profile Business Summary: The group is a leading specialty chemicals producer with its headquarters in the PRC.The group has two principal business segments, namely, lubricant additives and specialty fluorochemicals. Performance for the year: The group’s revenue was RMB3,359.4 million, RMB4,192.6 million and RMB5,033.8 million for the years ended December 31, 2011, 2012 and 2013, respectively, representing a CAGR of 22.4%. The group’s net profit was RMB948.1 million, RMB2,190.0 million and RMB2,626.2 million for the years ended December 31, 2011, 2012 and 2013, respectively, representing a CAGR of 66.4%. Business Review: The group is a leading specialty chemicals producer with its headquarters in the PRC. The group have two principal business segments, namely, lubricant additives and specialty fluorochemicals. According to Frost & Sullivan, in 2013, the group was the largest lubricant additives producer headquartered in the PRC and the sixth largest lubricant additives producer in the world in terms of revenue and one of only five comprehensive multi-line lubricant additives manufacturers in the world. According to Frost & Sullivan, in 2013, the group was also the largest specialty fluorochemicals producer headquartered in the PRC in terms of revenue. The group believes the group’s success can be attributed to the group’s technological advantages. According to Frost & Sullivan, the group’s lubricant additives product portfolio was among the most comprehensive in the PRC and the group was the only company headquartered in the PRC capable of producing long-chain linear alkyl benzene sulphonic acid, which is an important raw material for high-grade lubricant additives. According to Frost & Sullivan, the group is the only company worldwide that has developed the expertise in telomerization technology under moderate temperature and pressure, resulting in a safer production process and lower production costs, as compared to the traditional specialty fluorochemicals production process. In addition, according to Frost & Sullivan, the group is capable of producing specialty fluorochemicals through a PFOA- and PFOS-free process. This enables us to capitalize on the opportunities in light of the increasingly stringent enforcement of global regulation against PFOA and PFOS, environmentally hazardous contaminants. The group’s competitive advantages lie in the breadth of the group’s product portfolio, advanced technologies, capability to consistently produce and supply qualified products as well as diligence in providing quality after-sales services. As a result the group have been able to deliver continuous growth while maintaining profitability. During the Track Record Period, the group derived revenue from sales of lubricant additives and specialty fluorochemical products. The group values the group’s corporate social responsibilities and have been, and intend to remain, committed to environmental protection and safety in all of the group’s business activities. As advised by the group’s PRC legal adviser, as of the Latest Practicable Date, the group have obtained all material permits, licenses and approvals relating to environmental protection and safety production. In addition, as of the Latest Practicable Date, the group have obtained Quality Management System ISO9001, Environmental Management System ISO14001 for each of the group’s production facilities in operation. As of the Latest Practicable Date, the operating facilities of Jinzhou DPF-TH and FHT have obtained Occupational Health and Safety Management System GB/T28001-2011 and GB/T28001-2001 certifications, respectively. Prospects: DEVELOPMENT STRATEGIES The group’s objective is to continue to attain profitable growth by continuing the group’s investment in developing new products and innovating new technology, improving the product mix in the group’s product portfolio, maintaining existing long-term clients, expanding the group’s production capacity, lowering production costs and expanding the group’s domestic and global sales network. In order to achieve this, the group intend to: Expand production capacity in the PRC to capitalize on the strong demand for the group’s products Given the expected continuing strong demand in the PRC for lubricant additives and specialty fluorochemical products, which are expected to increase respectively at a CAGR of 4.7% and 15.6% per year between 2013 and 2018 according to Frost & Sullivan, the group intend to continue to add production capacity selectively to the group’s business segments. To minimize any market disruption from this additional production capacity, these expansions have been well planned, and will be rolled out gradually according to the group’s strict strategic plan. By 2015, the group intend to increase production capacity of lubricant additives to 1,159,000 tonnes per year, including production capacity of 600,000 tonnes of Group II and III base oil per year and 200,000 tonnes of fluorinated lubricant additives per year to meet the anticipated increase in demand and broaden the group’s product range in this business segment. In the PRC, the group intend to continue the group’s cautious expansion programme, and will add additional production capacity of lubricant additives products with strong market potential, such as Group II and III base oil, fluoride lubricating oil and various individual lubricant additive components. In the group’s specialty fluorochemicals segment, the group’s production capacity is expected to remain at 6,900 tonnes per year by 2015, while the group expand the group’s TFE monomer and TEI production lines, both of which are expected to commence commercial operations in 2017. In addition, in order to provide efficient services to local clients, the group may establish lubricant additives and specialty fluorochemicals plants and/or R&D facilities overseas, particularly Southeast Asia or North America, where the group expect to have growing market demand for the group’s products. Invest in R&D projects to expand the group’s current product offering of high revenue generating products The group have a history of developing commercially successful product innovations. The group intend to continue to develop next-generation, differentiating products to meet client and market preferences. In the lubricant additives business segment, the group intend to continue to expand the group’s product range, focusing especially on moving the group’s product offering from individual lubricant additive components to bespoke packages. In the specialty fluorochemicals business segment, the group intend to expand production capacity and invest in R&D to offer a wider range of products developed by the group’s R&D team based on market demand, particularly the demand in oil and gas, automotive and healthcare industries. The group will also look to capitalize on R&D synergies between the lubricant additives segment and specialty fluorochemicals segment. As of December 31, 2013, the group had 50 on-going R&D projects, with a focus on lubricant additives that could be utilized in high-speed locomotive engines and marine vessels, specialty fluorochemicals that could be applied to products for the oil and gas, consumer goods sectors, including agents used water-repellent and environment friendly paints, fluorochemical surfactants to improve performance of products used in oil extraction and transportation and agents that improve fuel efficiency. The group believe the group will be able to capture the anticipated growing market demand in relevant sectors and achieve sustainable development of the group’s business. Moreover, with the group’s R&D capabilities dependent on the group’s highly trained scientists, technicians and employees, the group intend to implement optimal hiring practices and retention programs. As the group’s customers demand a high degree of technical expertise from the group’s employees, the Directors believe it is vital that the group continue to invest in and develop this critical asset base. The group intend to further leverage the group’s advanced manufacturing technology, particularly the group’s capacity to produce specialty fluorochemical products through the group’s PFOA- and PFOS-free process, to work closely with other reputable domestic and international manufacturers to develop new applications, to expand the group’s market penetration and coverage and to enhance the group’s leading position in the market of high-margin products. The group’s objective is to support the group’s customers’ demands for technological expertise by attracting and retaining scientists with significant knowledge and experience in relevant industries and markets, and hiring, training and retaining highly skilled manufacturing staff to operate the group’s sophisticated and advanced production processes. Accordingly, the group have implemented a strategy of recognizing talent and performance with an attractive bonus and share compensation scheme which is intended to help align the interests of the group’s management with those of the group’s shareholders by linking remuneration with the group’s performance. The group also provide a safe, well-equipped and modern work environment, coupled with project management and special training programmes. Increase penetration of overseas markets based on superior product offering, partnership with international players, and building of capacity, R&D centers and sales force in selected international markets While continuing to invest in maintaining the group’s market leadership in the PRC, the group intend to expand into overseas markets by utilizing the group’s efficient operating platform with the aim of benefiting from overseas regions. The group will seek to increase the group’s market share in the lubricant additives business by offering major oil companies a broader portfolio of increasingly advanced and higher quality products, as well as customized and comprehensive packages. Additionally, where possible and strategically advantageous, the group will seek to enter into supply partnerships with multinational customers. The group will begin the group’s concerted international strategy by focusing on customers active in Southeast Asia, the Middle East and Africa. With respect to the specialty fluorochemicals business, the group intend to continue to invest in and develop the group’s market presence in the overseas markets through the group’s appointment of an exclusive distributor of specialty fluorochemicals in areas such as North and Latin America and select European countries. The group have already made sample sales of the group’s specialty fluorochemicals through the group’s exclusive distributor. Where appropriate, the group may appoint additional distributors for other regions. The group also intend to initiate direct sales with international customers in the U.S. and the E.U., taking into consideration the group’s existing relationships. Increase efficiencies and reduce costs in the group’s existing operations to further increase margins through process innovations The group intend to continue to invest in the group’s existing facilities in order to better leverage the group’s existing manufacturing infrastructure and reduce the group’s per unit manufacturing costs with a view to increasing the group’s competitiveness. Investments in the group’s existing manufacturing base will be focused on increasing the efficiency of operations while enhancing the quality and safety of products and operations, reflecting the group’s culture of continuous improvement and innovation. Process innovations are important to us and the group intend to continue to invest in process technologies which offer the potential to further increase the efficiency of the group’s production processes. These research projects will be spearheaded by the group’s dedicated research center in Liaoning, and the group’s goal is to continue these initiatives by leveraging the group’s reputation for specialist technological support and innovation. The group also intend to continue to maintain and develop interactive partnerships with the group’s customers in order to gain insight into the market’s product technology and formulation requirements. The group also intend to reinforce the group’s network within the scientific community at universities and research institutes. Expand through targeted acquisitions, joint ventures and partnerships with the goal of improving the group’s technology and supplementing the offerings of the group’s business In addition to the group’s planned production capacity increases, the group also intend to pursue actively value-added and incremental additions to the group’s businesses, products, applications and technology. The group may also establish joint ventures with reputable enterprises to explore into selected markets where appropriate. Any such additions would be for the purpose of increasing and diversifying the group’s product portfolio through acquiring new technologies and leveraging the group’s existing sales force and distribution system. Such initiatives would also enable us to extend the group’s offering into adjacent markets and complementary product areas, where the group can leverage the group’s extensive expertise. The group intend to follow a disciplined approach to acquisitions with a view towards ensuring future value creation and also intend to seek out partnerships and joint ventures as lower cost alternatives to acquisitions, with a particular focus on opportunities which offer the highest growth potential and will lead to successful global expansion and long-term strengthening of the group’s market position. As of the Latest Practicable Date, the group have not entered into any legally binding agreement in respect of any potential acquisition.

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